We believe strongly in the power of founder-led businesses for two main reasons.
First and foremost, we believe in founders because founders believe in their companies. Their business is personal to them, and that gives them a unique combination of vision, passion and mission that is essential to building something that lasts.
Secondly, data shows founder-led technology businesses tend to outperform companies who are led by hired guns. It isn’t always the case, but it’s the case more often than not. Studies featured in HBR and Reuters (among others) show that companies that still have a founder at the helm often do better in price performance, profit growth, innovation and recovering faster from a crisis.
Founders have a passion that fuels their mission
Founders will run through a brick wall to see their mission come to life. Whether it’s their entrepreneurial mindset, personal connection to the mission, or sheer perseverance, they’re virtually unstoppable, and that kind of passion is contagious with customers, partners and employees.
You can feel it in leaders who still helm the companies they founded: Jeff Bezos’ obsession with customer-centricity, Marc Benioff’s dedication to making Salesforce a platform for change, or Reed Hastings’ quest to reinvent entertainment. It’s not just the big guys either. Smaller technology players like Twilio, Okta, Slack, HashiCorp, who still have an active founder continue to outperform their peers and see huge valuations.
It’s this mix of passion and mission that keeps a company going even when there are only a few wins to celebrate — a situation every company goes through no matter how great it is. It’s what inspires other people to work hard, stick around, and treat every customer like the business depends on it. In professional services, where hundreds or thousands of consultants might be customer facing, and where recruiting and retention is a KPI, this mix is even more important.
Don’t get us wrong, the 1s and 0s are still important, and you still need to find great technologists, but people aren’t loyal to bits and bytes. They’re loyal to people. And founders — the exceptional ones — care about the people and the culture that binds the company together.
Freedom for Founders to Build and Lead
We don’t just look for exceptional founders, we also give them the freedom to do what they do best – build and lead. This is one of the reasons we typically choose to take a minority rather than majority stake in our investments.
As former operators and founders ourselves, we take more of an entrepreneurial mindset, not a strictly economic one. We’ve been there. We know the challenges and opportunities that come with scaling a professional services business. What it takes to grab market share and break through those plateaus of growth – getting beyond $10M or $50M to $100M and beyond. Breaking through those first few plateaus can be tough and many people do it, but the decisions and sequenced investments needed to navigate beyond $50M are considerably more challenging. We know what it takes to scale a services business, and how to sustain profitable growth over time. Part of that is capital, but that’s only a fraction of the equation.
Our role as invested operators isn’t to take over that journey for our portfolio founders, it’s to give them the guidance, capital and connections they need to navigate the journey for themselves.
Tercera balances the world of private equity in that we provide guidance to operationalize and scale a business, and the world of venture capitalism in that we come in early and help founders and ideas flourish.
If it sounds like the kind of partnership you’re looking for in your journey, hit us up here.